Market leader Toyota Motor Philippines Corp. (TMP) is disappointed that even locally produced cars would be slapped with higher excise taxes, making the incentive under a flagship manufacturing program “meaningless.”

TMP President Satoru Suzuki told reporters on Wednesday that the company may now find it hard to commit to its previous target under the CARS program, an initiative under the Aquino administration that gave incentive to the local production of large volumes of cars in the Philippines.

The Comprehensive Automotive Resurgence Strategy (CARS) program is a multibillion peso initiative that grants perks to participating car companies that could locally produce 200,000 units within six years. Toyota, one of two car firms that have qualified for the program, initially wanted to produce more than the bare minimum, promising 230,000 units of its Vios model instead.

The new rates form part of the recently passed TRAIN law, or the Tax Reform for Acceleration and Inclusion, which is the first package of the comprehensive tax reform program under the Duterte administration.

Under the new law, the personal income tax of Filipinos will be reduced at the expense of higher and new consumption taxes. This includes higher car excise taxes imposed on the net manufacturing price or the importer’s selling price on some price brackets.

Because of this, Toyota expects a five- to ten-percent decrease in total company sales in 2018, he said. He added that the company is expected to recover its growth from 2019 onwards.

More expensive rates

Toyota’s Vios model falls under the P600,000 to P1 million bracket, according to Suzuki. Under the TRAIN law, its net manufacturing price would be slapped a 10-percent excise tax.

Prior to the TRAIN law, the said unit would have been taxed only 20 percent of the excess of P600,000 plus a base tax of P12,000. The TRAIN law, on the other hand, taxes the unit based on its full net manufacturing price.

“We have to complete our requirement of the CARS program which is the 200,000 [units] minimum for six years. Still, we don’t give up yet but this achievement of [making 230,000 units] became very hard,” he said.

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Local production of an all-new Vios model would start July next year. A total of 30,000 to 35,000 units are expected by the end of 2018.

‘Second disappointment’

While the TRAIN law slaps higher excise taxes on more affordable price brackets, luxury cars would pay less taxes compared to current rates, a logic which Suzuki could not understand, especially if Congress was hell-bent on collecting more tax revenues.

“That’s my second disappointment. I cannot understand the intention why [they would] motivate the rich people. I believe the government needs more money,” he explained.

Toyota, which as of November had a 43-percent market share of the entire car industry, sold 166,601 units in the first 11 months of the year, already surpassing the full year sales in 2015 by more than ten percent.

Suzuki said the company expects to end 2017 with around 180,000 unit sales, continuing its consistent growth in deliverables every month. This, however, would stop starting next year with the expected drop in demand.

He said the consumers have already bought ahead of the imposition of the new car excise rates, even when the price increases were just speculations based on changing tax proposals.

This means that “some portion” of the market for next year has already been eaten up. To compensate for the increase in taxes, he said Toyota would rely on so-called countermeasures such as product enhancement and financing support.

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